The Matching Function and Nonlinear Business Cycles

Joshua Bernstein (), Alexander Richter and Nathaniel Throckmorton

No 2201, Working Papers from Federal Reserve Bank of Dallas

Abstract: The Cobb-Douglas matching function is ubiquitous in search and matching models, even though it imposes a constant matching elasticity that is unlikely to hold empirically. Using a general constant returns to scale matching function, this paper first derives analytical conditions that determine how the cyclicality of the matching elasticity amplifies or dampens the nonlinear dynamics of the job finding and unemployment rates. It then demonstrates that these effects are quantitatively significant and driven by plausible variation in the matching elasticity.

Keywords: Matching Function; Matching Elasticity; Nonlinear; Finding Rate; Unemployment (search for similar items in EconPapers)
JEL-codes: E24 E32 E37 J63 J64 (search for similar items in EconPapers)
Pages: 28
Date: 2022-02-09
New Economics Papers: this item is included in nep-dge, nep-lab, nep-mac and nep-ore
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddwp:93702

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DOI: 10.24149/wp2201

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